© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the Serinus Energy plc Q1 results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. Although the company will review all questions submitted today and publish responses as appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand over to Jeffrey Auld, CEO, Andrew Fairclough, CFO; Stuart Morrison, COO; and Calvin Brackman, External Relations and Strategy. Good morning to you, all.
Good morning, and thanks, everyone, for joining our financial results for the 3 months ended the 31st of March 2022. As usual, I'll make a couple of introductory comments, then I'll hand over to Andrew, and he'll run over the financial results.
The first quarter operationally was a pretty busy quarter for us. We finished the wellsite preparation for the artificial lift program. We air freighted the pump into Tunisia. We have all the 2 dealers. Everything is on site, ready to go. Once we have visibility on that pump, which everyone knows was delayed in fabrication, we got around some of the global logistics problems by airfreighting it, which is something we'd rather not do, but it was a means to get that rig contract signed faster. And obviously, we don't want to sign up a rig contract until we know where the pump is. The worst-case scenario would be having the rig on contract without having the equipment to be able to do the well. So as soon as we had visibility on the pump, we signed a rig contract. The rig is with our competitor in the country. It's with OMV. They're doing a workover program. And as soon as it's released from their workover program, which we believe is imminent, it will be on contract with us. All of the civil works are completed.
As I said, all the tubulars and consumables are on site. We will do the W-1 workover, and that will be installing the first artificial lift pump, and we will mobilize the rig to the Sabria N-2 well, which is just about to north of our best producer, the Win-12bis well, and we'll work over that one. In the first quarter, we also completed the 2D seismic program. And there are -- we have run that 2D seismic program to narrow down and highlight exactly where the well locations will be for our well program towards the end of this year or in the middle of this year. That seismic has been processed. It's an interpretation, and we're doing the analysis right now. That seismic has allowed us to place those well locations that we're currently permitting.
And I think the permitting in Romania is one of the slower features that we don't really control. We have to go through a lot of different permit thresholds, both at a local level and at the national level. And that permitting is in place. And as soon as we can get that permitting going, we will go off on that exploration campaign. The data supports up to 3 projects. We've always said that we would like to do 2 this year, one could slip into next year, one could accelerate. We're doing that as quickly as we can. We are comfortable that rig availability -- that rigs are available. We've actually put tenders out for rigs. We've had those tenders back. We're reviewing what rigs are available. There will be a deep well and 2 shallows. So we're trying to maximize or find the best rate for that.
Production for the period was 1,115 barrels. It was 610 barrels in Romania. Our compression has stabilized that production, but I have said repeatedly, Romanian production will not go up until we have new wells. Tunisia, we're a little bit lower because we had wells down for workovers and putting pumps in. We're almost on that pump program. We've got one more workover that we're working on, and we should be back up to the higher levels of production pre having any success from W-1 or N-2. So those numbers will come up in Tunisia. The numbers are down for the quarter as we did the workovers and put more pumps in wells. The pump program in Chouech has been very successful, and we're hoping the pump program as we initiate and Sabria will show the same sort of success. So operationally, the guys in the field have been very, very busy in the first quarter.
There is no doubt that we've been the beneficiaries of strong prices. The prices have been, as you'll see when we get into the financial results, there are some very, very high numbers. Obviously, we've had a global supply disruptions in oil and gas. We've had underinvestment for many, many years, and then we've had a war in the Ukraine. And so that has had an effect on our product prices. Unfortunately, we do have a fairly regressive tax regime withholding tax in Romania. So while our revenue is increasing at a decreasing rate, we don't get the stunning uplifts that the price would indicate because a lot of that does go in the form of a windfall tax.
We think that tax is very, very regressive. It does prevent a lot of incremental investment in Romania. And we've been trying, as far as we can talk to the Romanian government about a fiscal system that's more accommodated for investment. Everyone wants energy security now. Gas where you have it should be developed and if you have a fiscal system that's preventing the development of some of your gas resources, obviously, that's not what you want. So we've been in discussions with that. But we've worn for a while.
We've seen both the pandemic and the supply or the price inflection point from supply and demand and oil and gas being a catalyst for fiscal uncertainty. And I think that's global. I think we're at the sharp point of the spear in that in Romania with the windfall tax, but all over Europe, now you're starting to hear about windfall taxes on gas. So hopefully, we -- the Romanians will look towards a fiscal system that is a little bit less regressive. But we live in the world we live in, and we're an honorable taxpayer. And unfortunately, whilst we don't agree with the structure of the tax, we do pay our taxes. So that's really where we are in the quarter. Strong prices. Strong prices are definitely helping us. And some of the financial numbers are a result of those strong prices, and that's one of the things in the commodity cycle.
We built this company to be stable at lower prices, and we hope that the upside in the commodity prices accrue to our cash flow and our earnings, which they are.
Okay. So moving on to the financial highlights. As Jeff said, we can see the impact of the strong commodity prices. We generated revenue of $13.4 million for the period. The realized oil price just over $90 per barrel realized gas price of just under $34 per Mcf. We generated net income of $1 million in the quarter. Again, that's versus a net loss of $1 million in the comparative period. Operating netbacks, again, strong, nearly $150 per BOE.
You can see that the Romanian pricing is very, very resilient, nearly $193 per BOE and Tunisia is $42 per BOE. CapEx, $1.5 million in the period. $1.3 million of that was in Romania, largely due as a result of our 2D seismic acquisition program and the second compressor. We will see further CapEx in Romania in the second half of the year as the drilling campaign moves into the year. In Tunisia, we spent $0.2 million in the period on artificial lift expenditures. And again, as the artificial lift program goes underway in the current period, we'll see further CapEx through the rest of the year. EBITDA $3.1 million and cash balance of $6.2 million, which is after our investments in CapEx and investment in working capital in the business. So strong cash generation, cash flow investment and well positioned for ongoing CapEx program through the rest of this year.
Looking a little bit more. Now we can see the progression of revenue in the quarter. Cost of sales increased $10.4 million. That is, as you can see, very predominantly driven by a significant increase in windfall tax in the period versus the comparative period despite lower appreciation, depreciation and lower OpEx and royalties. Gross profit, nearly $3 million in the period. And you can see the transition from net loss to a net income of $1 million. Average production volumes. As Jeff mentioned earlier, in the operational highlights, we produced 1,115 BOE per day. Romania was stabilized this quarter versus the last quarter and continues on our -- with the natural declines, although we're seeing the impact of having installed the second compressor in this period.
Tunisia, again, stable production with a slight impact because of the workovers that were ongoing through the period. Average realized price of nearly $185 per BOE, a very significant reflection of the current market environment at this point in time. Production expense. Production expense in the quarter reduced to $2 million. In Tunisia it was $0.6 million, a reflection of sort of low workover costs. Romania slightly increased to $1.4 million as a result of higher water disposal costs. As Jeff said earlier, we are seeing the impact of inflation across the board. I know that we'll continue to see that for a while. On a per BOE basis, it was $28.43 per BOE at a group level.
The operating netback, again, $149 per BOE, very much showing the impact of commodity prices outpacing other associated costs in the business. So very strong operating netback for the business. CapEx, as I said earlier, we have incurred $1.5 million so far in the year. And our CapEx program now will be very much sort of weighted towards the following quarters through the rest of this year as Tunisian artificial lift gets underway and our exploration program in Romania starts moving forward in the latter half of the year. EBITDA of $3.1 million. We run the business and focus on cash flow and cash flow is the key driver for us to be able to continue to invest and position the business for growth.
And in summary, really, in regards to the cash flows, we've had a strong cash generation period. We've invested in the business. We have a CapEx program going forward, and we have the ability to continue to invest and drive that growth going forward. Jeffrey?
So we've talked about the plans for the rest of the year. Quite critical to the plans are the first pumps in Sabria. And further to that, we have the near field exploration in Romania. I think we pushed as fast as we can, having designed, executed and processed the seismic program in 4.5, 5 months to help us with that exploration, to derisk that exploration. We now have our targets in Romania. Those targets are within 5 kilometers of the Moftinu gas plant. So upon success, those are quick to tie in.
In Tunisia, it has been a frustrating way for a pump that is -- that was fabricated. Fabrication times are starting to compress. They're now back to normal now. So future plans are starting to look a little bit more predictable when we originally ordered the artificial lift for the West 1, the pump for West 1. Schlumberger was unable to even give us a delivery time because their whole supply chain was disrupted. We now can get delivery times. We check back on those delivery times and they are shrinking. So the trend is in the right direction for the future pumps. But obviously, that pump has been very frustrating for everyone. And now we're waiting on the rig. So the rig is due imminently. We have a 90-day program with that rig that will do Sabria W-1 and N-2 back to back. So the results are -- we've built up the foundation for the results. Now we have to go and capture.
Financially strong, and there's no doubt that has to do with the commodity price. But I would also remind everyone that we build the cost structure of this business to be successful at a much, much lower commodity price. And that's how we focus. Our costs have not inflated with the commodity price. In fact, our costs have come down. And so we continue to make sure the costs are managed and then the commodity price, we can hope that the commodity price accrues to us as upside. I should comment here on inflation. We are seeing some very stark inflation. Tubulars have doubled in price in the last 6 months. We managed to buy the tubulars for all of our workover programs in Tunisia ahead of that increase by watching the rolled steel future prices. So we got to jump on that one. But there's many, many things in our business that we can't inventory the inflation out of the cost structure. So inflation, not just in your local grocery store, but in oilfield equipment is something we're watching very, very carefully. We're seeing it on almost everything, and it's a cost that we really need to be careful with.
So all in all, we're now poised for the heavy work the next couple of quarters, and we would like to see the results of that as soon as we can, and we're working towards that.
That's fantastic.
I'll very quickly just -- we do finish up every time with our environmental and safety. We continue to run with no lost time incidents in both of our business units. We are expanding solar power generation. It's not sufficient enough to put solar power on the top of a couple of porta cabins. We're now putting it on top of our chemical shed in Romania to try to augment the power from the medium voltage line and run the plant a little bit more efficiently. Solar panels are a long, long payback, but we do offset the OpEx that comes from the grid. And we're looking for similar solar plants in Tunisia to see if we can help the economics and the operating costs of our facilities. But no lost time incidents is the real message of this page. And that is our presentation. Paul?
That's fantastic. Thank you very much, indeed, Jeffrey. Ladies and gentlemen, do please continue to submit your questions using the Q&A tab situated on the right-hand corner of your screen. But just want the team take a few moments to review those questions submitted today. I'd like to remind you the recording of the presentation with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Jeffrey, we did receive a number of presubmitted questions from investors and perhaps we can start the Q&A session off with these.
The first one reads as follows. For most of Q1, the price of oil has been over $100 a barrel. At this price, revenues will be significantly above last year's if the price remains for the current year. In these circumstances, once the 2022 capital program has been paid for, would the Board consider a one-off dividend payment as opposed to buybacks.
Well, the board always considers distributions. The company, when we continue the company out of Canada into Jersey that was done to make sure that the structure of the company was able to distribute value to shareholders. So we have always looked at distribution as being part of the value return to shareholders. The companies that I've run in the past have always been -- have always distributed. Some have distributed a very, very large numbers. So philosophically, we believe in distributions. A one-off dividend is, I think, unlikely, but we strive to become a dividend-paying company. So we have always tried to match our operating cash flow with our capital program. So we haven't tried to outgrow what we're generating in cash flow. And this is why Andrew says, we run the business on cash. We would rather not do equity raises. We'd rather build the business on the foundation of operating cash flow.
However, if we did an equity raise, it would be for growth and to accelerate growth. But right now, capital is not holding back that acceleration of growth. What's holding back. It's just the time it takes to do seismic. The time it takes to procure equipment, the time it takes to get permitted to drill. So there's a time function that capital can't solve. The answer to the question is, yes, we would strive to become a dividend-paying company. It would be unlikely, it would be a one-off. It would more likely that we would look to put a repeatable dividend in place. That would be our objective. But that would come after we felt that we had invested in our growth sufficiently to support that dividend for future periods.
That's great. Thank you, Jeffrey. Second question we've got here in comparison to the AIM listed businesses and for a business with such a small market cap. The remuneration packages of the CEO and CFO appear to be excessive. How can these be justified when it can be argued that the recent successes are largely due to the increase in spot price rather than material output improvement?
I'm going to object to a number of points in this question. Firstly, we -- our remuneration committee benchmarks our salaries against a peer group of companies on AIM. That group of companies is selected by a remuneration consultant and includes operating -- companies that operate their assets, so nonoperating companies aren't included. And it largely includes companies that have production. And we strive to be in the second quartile. We've recently had that remuneration report done and the salaries are in the second quartile. Our remuneration committee looks at total compensation. This is only the second time since I've been a part of this company that our long-term incentive program has been -- has actually paid out to our employees.
So for the most time, we only -- we have the salaries, and we have options that we were granted when we joined. And so if you look at our total compensation, we're in the second quartile or the bottom of the second quartile rate above the medium. I think certainly, you can find people that are paid less. And certainly, you can find people that are paid more. I rely on our remuneration committee to judge whether the salaries and the compensation, the total compensation are correct. So I don't agree that it's successive. How can these be justified with the clarity that recent successes are largely due to increases in spot prices? I'm sorry, that's -- yes, we're a beneficiary of commodity prices for the last 4, 5 months.
We have spent a great deal of time building this business to be robust at any commodity price. The years that we've put in, making sure that our costs are efficient, the years that we've put in, trying to make sure that the investments are on a risk-adjusted return basis, the best that we can make. Those have nothing to do with commodity prices. Commodity prices have come through as they are cyclical and as they do, and we are a beneficiary of them right now. and we're enjoying that. But we built a gas plant from a cornfield.
We have taken an operation in Tunisia that was consistently going down, and we've managed to stabilize that and not to a great percentage terms, but that is now increasing in production. And we hope that the capital we're investing in the pumps and in exploration will dramatically increase that. So no, I really -- yes, we are beneficiary of the commodity prices, but the company was not built and the building work that went on was not to just sort of cream the top of the commodity cycle is to be successful through the cycle. A beneficiary of that right now. Yes, we are.
Fantastic. Thank you, Jeffrey. Next question we've got here, what are the company doing to improve the limited PR at best over the last few months? We've heard the compressors being installed on 2 wells. Have they stabilized production, increased? I know you've covered some of this in the presentation. Also, a COO was appointed over 6 months ago. We've not heard anything as record going to be published and what happened to the well, which was suspended.
Well, we do our routine PR. We are in the market. We go to company. We go to industry events. We're always available to shareholders. We quarterly report, if there are material changes outside of the quarterly report, we do operational updates. So we report when there's something to report. We're not a business that is out there trying to -- trying to bang the drum and create a froth of excitement. We're a company that tries to show the results of our investment, which I think we have. But we don't believe that our PR is limited. We believe our PR is adequate for -- and acceptable for what we're doing. We do not go to 100 different industry events. We pick them carefully, the ones we think that give us the best exposure. And we try to communicate with shareholders like we're doing on these calls on a quarterly basis, where a great deal of information is provided on a quarterly report.
We also do reserve reports annually. And so between quarterly reports and reserve reports, we believe we are at the higher end of information that's available for the company. As to the compressors, yes, the compressors have stabilized production. We said after the first compressor was in at the last results call that, that compressor was intended to do to stabilize production. Increased production, no, compressors, and I said this on the call, I was unable to be at the last call. The call, prior to that, I said that the compressors were not going to increase production, they stabilize and limit a decline. And that's what they've done.
Certainly, Stuart Morrison was appointed as our CEO 6 months ago, and we've not heard anything from him. Stuart is on this call and if there's a specific technical question, I will send that to him. Stuart is available to talk to people. So no, haven't heard anything from him because Andrew and I do most of these calls as they are financial results calls, but Stuart has been working very hard with both of our teams in the business units.
Is the report going to be published and what happened to the well that was suspended? I think there's been -- I'm told there's a great deal of misunderstanding. I think on the call, I said after Sancrai was drilled that Stuart would report back to us. We do not publish technical reports that include details of our proprietary 3D seismic or details of a well test. We don't publish those publicly. So if there was an expectation that somehow we would publish a technical report on the success or failure of a well, I apologize if that was a misunderstanding. I said that they would report back to us. Stuart indeed -- he, indeed, did report back to us that being the management of the company and the Board of the company.
After the results of that well, we said that we looked at what could have happened, the well discovered gas but we couldn't get that gas to flow. There are a variety of reasons why. And perhaps Stuart, people are longing to hear from you, you could go into some of the reasons why that well wasn't -- didn't flow. But if Stuart goes into those reasons, the decision that was made was that the cost of trying to investigate the reasons was better spent on our new exploration program. So Stuart, do you want to go very quickly through the Sancrai well and what could have been the reason that we discovered gas that couldn't flow to the surface.
Yes. Certainly, Jeff. No, this one was quite a buzzword, and we had a variety of theories on what happened. I think we boiled them down to 2 front runners, which really consists of did we drill too far down the structure. And so the amount of gas that was at the well location was enough for some strong shows, but not quite enough to flow on test. And the other one is that maybe we have gas that is still filling up the structure or a bit of the gas is leaked out and we've got the residual gas down at that depth. So we think there could well be viable gas in that structure. But if it is, it's going to be smaller than the original target. And that would take quite a substantial amount of work to target. And we think we've got better targets to go for than searching around that area just now. Good question.
Yes. And that's important that Stuart says just now. We haven't abandoned that well. We've kept it suspended. If it is the first theory that we've drilled too far down dip, so down on the edge of the structure, higher up the structure, there's gas. So that would mean that well, it could be smaller. And so measured against some of our other opportunities, we have better opportunities. If it is that theory period that it's -- we're down on the flank of the field, then obviously, it would be another well. And so you're actually measuring a new well versus all the other new wells you can do. So yes, if there was a misunderstanding that the technical report, including proprietary 3D seismic proprietary well testing results and that would be released publicly. Sorry, that is not what this company or any company would do. I'm sorry if there was a misunderstanding. But we have had a report from Stuart, a very comprehensive report, and we have made our tactical decisions based on that report.
Thank you, Jeffrey. Thank you, Stuart. Next question we've got here. I think you have covered this off in the presentation, but if there is anything further to add, what is the current situation in Romania? What about the multi-well drilling campaign for '22?
Yes, I think we've talked about this. The situation in Romania is we're permitting well locations. That goes from everything from permitting the roads that we need to build to get to the location, to environmental permits, to permits to build the platform for the well, permits to drill. It is a pretty bureaucratic process in Romania. It is the one process that it goes into the machine of the government. We're pretty good at it, but it does take time. So that's where we're at. We have the locations, and we'll be drilling as soon as we can. I think we're on -- we said we drilled 2 wells in the second half, maybe 3, if we can get them in. If not the third will be in early 2023, and we're on target for that.
Fantastic. Next question here, perhaps a little bit of confusion, perhaps in a question pop in the live list as well today. Is your intention to delist Serinus Energy plc from the stock market permanently if yes, one. And a separate question, which reads, is trading of Serinus Energy stock going to be suspended only temporarily until May 30 or if Serinus Energy plc going to be removed from the stock market permanently. So if you could just clarify that, Jeffrey...
Yes, I'm a little puzzled about what we're asking for. I think this refers to the Warsaw Stock Exchange and the listing we have in Warsaw, the Warsaw Stock Exchange suspended the shares pending our shareholder vote on the consolidation. That is a temporary suspension. We argued against the suspension. We do not want our shares ever suspended. We believe it's the right of our shareholders to trade an asset that they own. And so we argued against the suspension.
Apparently, it's standard in order to have the depository except the consolidated, the new ISIN for the consolidated shares. But we did argue against the suspension. We are suspended at the whim of the Warsaw Stock Exchange temporarily until the new ISIN and the depository are adjusted. We have no intentions to delist Serinus. However, there's an argument that we're not getting value on a stock exchange right now. But no, we have no intention to delist Serinus.
Fantastic. Thanks. Next, we've got here. There's no doubt the company has achieved great things in the last 18 months, but shareholders measure success based on the stock price, which will only move once the business shows the market that resources are growing, not dwindling. Does the Board understand the vital importance of this?
Yes. Absolutely. I mean this is fundamental. I think the business has done some very impressive things, but we have not been rewarded for it. I understand that there's a view that production is I believe -- we've always said the shallow gas fields in Romania are quick. They're economically great. They boom at the front, but they do decline quickly. The intention was to have Sancrai come on and fill them up and backfill that decline, and that didn't work. So we have a gap. We do not believe our resources are dwindling. We have a reserve report that comes out every year. Certainly, we had reserves decline at the reserve report this year, and that was as a result of the Moftinu field being produced.
We believe there is ample resource and reserves in this company to work towards. We do not believe that we have a dwindling asset base. We do believe that smaller companies do have lumpy production. We will spike production, we will decline again. We do not have enough resources in terms of human capital, in terms of being able to get rigs in place, all of that to consistently have an upward trend. But the idea is to have, over time, a significantly upward trend. We believe that artificial lift will do that. We believe that upon success in the exploration program in Romania will do that. But we are very, very frustrated with the share price. I repeatedly have people phoning me and say that I suggest that the share price should be 16 and it's not.
Look, we have a couple of research analysts out there who agree with me. Everyone who does research on the business comes up with those kind of numbers. So I stand by the fact that we are vastly undervalued. Does the Board understand that, "Oh, yes, I mean, we are extremely frustrated. We are -- we understand that the likely catalyst to move the share price is a production success. We were hoping that would be Sancrai, it wasn't. But that's what happens with exploration. We're a small company. It will be lumpy, and we are doing everything we can to try to grow to smooth that lumpiness, but that's the nature of what we are right now.
Great. Thank you, Jeffrey. Next one we have is what phases the arbitration for the work deemed 100% interest in the Romanian fill?
Tribunal has had both parties presented them, and that was 2, 3 weeks ago. Tribunal come back with further questions. We would hope that we would have a result from that this year, but it is an arbitration tribunal, and they do have the right to come back and ask many questions in that. We have a counterparty who does like to try to delay things. I think it's fair to say that they're not -- they're not really assisting the arbitration as much as we might be. So I can't give you an exact date, but we have had the panel meet and go through testimony from both parties about 3 weeks ago.
That's great. I've got one here. What volume and revenue growth opportunities have now risen post the Russia-Ukrainian war?
Well, I think even before the Russian invasion, we saw a supply-demand inflection in almost all commodities was driving commodity prices up. And so that's a revenue benefit. The focus then is to try to make sure your costs don't rise. So that's why we're so focused on inflation so that we capture as much of that rising revenue versus stable cost delta that we can. As the volume -- our volume expectations haven't changed. They haven't changed in -- since we started putting plans in place for the exploration program and the artificial lift. In fact, the artificial lift numbers haven't changed for 2 years.
They've been on our corporate presentations for almost 2 years, I think. So the volumes from Romanian exploration, those are much, much harder to anticipate. But we haven't really had volume expectation change because of -- these are global supply demand inflections between -- in commodities or the Russian invasion. But we have had, obviously, the revenue growth from the price increases. But let's remember, I mean there's -- prices were already spiking up before the invasion. And there's a lot of people that argue that, that invasion hasn't been reflected in prices that the actual shortfall in supply is -- but the disruptions from the invasion loss, we have spikes haven't generally been incorporated. But yes, revenue is clearly benefiting.
And the final presubmitted question we have here is when will the Board of Directors take some personal responsibility and provide shareholders some production guidance? Board of Directors is very handsomely rewarded, yet at first to provide any form of guidance or commitment to a target.
We've always been clear, we don't provide production guidance. We have always been clear about that. And there's a very, very simple reason. We have a limited well stock. So we don't have very many wells. When we get sand coming into one well, and we have to shut it in to clean it out, it can have a very material effect and it's almost impossible to predict. We can't predict when a well is going to get sand or we can't predict when we're going to have barites build up in Tunisia. And so if we have a much, much bigger well stock, and it was more predictable, less lumpy, yes, we'd be happy to give a production guidance. But as it is, we don't have a big enough well stock to be able to give clear guidance. It wouldn't just be anything other than a gas.
What we do, do is we quarterly give you our production. We give you a reserve report every year that has production declines in them. And between that, that gives you an idea of where our existing production should be. We have on our incremental capital investment, like the artificial lift, given as clear guidance as we can as to what we might expect from that. We would always try to use third-party guidance on that. So third parties have taken a look at this so that we're not making up numbers or we're not guessing. And we've tried to get as clear as possible. So for example, on the artificial lift in Tunisia, you can find in our corporate presentations, the expectations of productions from the consultant that we had through the artificial lift study, SGS, and those numbers are there. So we do give all the information we can, but guidance is very difficult because of the limited number of wells that we have.
So we would either have to take a prediction on those wells and then downgrade it for events that we can't predict or we would have to give you what we see and then hope like hell that we didn't have a well that got some barites in it, we had to do a workover. I think what people need to remember is our Tunisian well stock is old. These are old wells. We keep them as clean as we can. But it's kind of like a 1978 Toyota. You don't know when it's going to break down. You know it is. And so we fix it up again. Our wells in Romania are into a shallow gas field with a reservoir that is not wholly consolidated. What that means that it's sandstones, it can almost be sand. So we can produce sand. If we produce too much sand, we have to clean up that well. These are very, very unpredictable.
So it's very, very hard for us to give a production guidance that would be a reasonable production guidance. It would be something other than just gas. So it's certainly -- the Board is taking absolute responsibility in making sure our shareholders have real numbers, not guess. That's what the Board is taking responsibility for, and I think we've done that. We give as much guidance as we can, but I mean, with a limited number of wells, we don't have enough wells to sort of give you that portfolio effect as well. We are striving to do that. That's the whole game here is to try to have enough wells that we smooth that fluctuation. And then if we have a workover on one well, okay, it will affect us, but not as dramatically as it does right now.
Jeffrey, thank you very much, indeed. That does conclude the presubmitted questions. As you can see, we have had a number of questions submitted throughout today's presentation. If I may, Jeffrey, just ask you to click on that Q&A tab. And just where appropriate to do so, if you could please read out the question, say who it's from, that would be fantastic.
Okay. We do have a question from Michael. I would like to ask you when the company starts with buybacks.
Well, we have just had another Annual General Meeting this morning where our shareholders have approved the company to buy back its shares. That does not mean we're going to buy back 10% of the shares. That means we have authorization to buy back machines. In that resolution, it gives the guidelines for what we can -- how we buy back our shares. And we do have rules of how we can buy back shares. We went into the market earlier this year to buy back some shares. It's very, very difficult for us to get a volume of shares when we do try to buy back. We are always monitoring that. We are always keeping an eye on that. But I don't think there's a schedule of a buyback. It would be opportunistic when the Board believes we should be buying back shares.
Another question, how will you maintain the levels of income if oil prices declined from the current levels?
Well, we won't. That's I think every oil company. We're not going to be able to increase production fast enough. If oil prices have, which I don't think they will, our revenue and our -- ultimately, our income will have an effect. So I don't think -- I think the volatility, the high volatility in the commodity prices upwards that we saw earlier this year. I don't think we're going to see volatility going downwards, but that's starkly, but we may. But the simple answer is yes, commodity prices affect us. What we do is we just try to keep that cost as efficient as possible so that we are able to continue to make money, continue to generate cash flow at much, much lower commodity prices and which we opt.
The next question, is the company showing outside interest for a takeover?
We have always wanted to grow inorganically. At these share prices, it's difficult. I don't think this is the proper value. And to do a transaction at these prices is dilutive to our current shareholders. And I think it's our job to protect our shareholders for value. However, others are suffering the same sort of there are other producers that are performing in a similar manner. So yes, we would like to grow the company inorganically.
The next question. Tunisian production of $505 per day is tiny when you compare it to the reserves. When can you expect significant growth of production?
Yes, it is absolutely time. For the last 40 years, there have been 1% of the oil in place of the Sabria field produced. A 1% in 40 years. If this field was in North America, that should be about 30%. It would be developed as a resource play, there would be wells all over the Sabria field. There are a number of reasons why in the past that hasn't been the case. It's expensive to drill in Tunisia because there's a drilling monopoly, the government. There's not a lot of services in the company, which make it expensive. So it is absolutely funny.
What's even smaller is the 1% of the 445 million barrels in place. So what are we doing about it? Well, the first thing is we need to make our existing well stock more efficient. So we have wells that have never produced because they've been damaged when they were first drilled many, many years ago. That's the N-2 well. We're going to reenter that. We're going to see if we can get that to produce. It's right into a reservoir that we know exists, and we're going to put the artificial lift in.
So the expected significant growth in production is later this year. And we've said that for a long time, we've been frustrated by how long it's taken to get there. But you're absolutely right. I think that's one of the really intriguing things about Sabria, is how little of it over 40 years has been produced, 1% of 445 million barrels. That is one of the opportunities we really have out there. And it is frustrating that Tunisia is a hard place to move things quickly. We're doing everything we can. We'd like to -- I'm known to be not the most patient man in the world. I'd like to get going, but it's not through lack of activity or lack of capital that the company is moving at these is going to limit use cases.
A question from Paul. Why do you think the shares are down 20% today and what appears to be reasonable results? Is it simply the windfall taxes? Could you describe what these are and how long they're likely to last?
I don't know why the shares are down 20%. These are not just reasonably results, these are good, strong results. I believe that people are looking for production increases. But I would remind people that those production increases are coming as a small company, we can't just magic things up. We have a stream of work that needs to get done. Someone asked me this morning, why we couldn't speed it up. Well, we can't -- money cannot speed up seismic. Money cannot speed up procurement of -- we couldn't have paid anything last year to get Schlumberger to accelerate that pump. We were in a queue. We had a contract, we had to wait.
So we do have the production increments. We do have the opportunities to grow our production. Those are imminent now. It's been a long hard slog, and we're now on the cusp of being able to deliver those. But I am very frustrated that not just reasonable results, good, solid financial results, 20%. We just lost equity value of all the operating cash flow that we just generated in a quarter. It does not make sense to me. Businesses should be run for cash, and we are generating cash. Is it the windfall taxes. No, the windfall tax is look, we -- at higher prices, we continue to -- revenue continues to grow. It just grows at a decreasing rate. It's a very regressive tax. But no, I don't believe it just -- it slows down your growth. It doesn't take away growth.
Could you describe what these are and how long they're likely to last for?
I think we're in a high fiscal risk environment. So they're likely to last for the period of the high commodity prices and possibly longer. We are trying to work with the government to encourage them to come up with a better fiscal system. But the windfall tax effectively increases above as prices go over thresholds. The government takes more of the revenue, and it's a tax at revenue. So we do have to be very, very careful with our costs in the country.
So we've got lower sales than production in Tunisia. This is a very good question.
Pavel has picked up that our sales are lower than our production in Tunisia. This is because historically, we would sell through what's called the Shell contract, where because we had a contract, we were -- we were able to show our production as sales in the period that they occurred. What we do now is we do liftings -- for the last couple of liftings, we've negotiated directly with oil traders or with other producers in the country. And so what you have in this period is you have us producing the crude, the crude goes into inventory and then when we do a lifting, we sell that and the revenue shows up. And so in this period, we did a lifting on April 22, I think. So it was outside the period. So all of the production for that period had accrued in storage, and then we did the lifting in April, and we get paid in April. We did a lifting for, I think it was 42,000 barrels at $104.79. So we got a very, very good price, but we accrue -- we build up enough to do a lifting. So we're not on a pipeline. So we don't sell like we do in Romania where we sell every -- basically, we sell every day as it moves through a fiscal meter.
In Tunisia, we built it up in tanks, and we sell. So that's a very good question. Will volumes do foresee again, we don't give production forecast, but we're currently stabilized production and any incremental production will come from exploration. So you can assume we've flattened that production. There will be slight declines, but not what we've seen before. And any incremental production would come from exploration, which, again, is pretty hard to predict. We have to predict the success and then we have to predict the volume from the wells, which is very, very difficult in the wells that we're doing.
Theodore asks about gas prices in Romania. Do we expect them to be higher than in 2021?
Look, we -- there's lots of destructions in the world. I can't predict what's going to go on in Ukraine. I think that we know -- we know that the marginal supply of gas into Europe is increasingly Atlantic basin LNG. And we know what the cost stack is for that. So we know Atlantic basin LNG starts with Henry Hub and you get that to the coast and you liquefy and then you get it to your regas facility. If you add up all those costs, you come to about $16 an Mcf. So that's really what your most competitive gas comes into Europe can be at. We're trading at $30, $40 right now above that. So unless we could get a lot of regas into Europe, you've got a base of 16, you got a price now of about $30 to $40. That gives you your parameters, predicting where it's going to fall in those parameters. It is a really difficult one. But we built the company on, again, on the lower expectation and hope to get the benefit of the higher.
The 10 for 1 consolidation, what is the thought process behind that? Do you think it will impact the differentiating indication and valuations between
The 10 for 1 consolidation, we've had over the last 5 years, a number of equity raises, most of them to help us relieve ourselves of the excessive debt burden we've had. So a lot of shares were raised. We ended up having more than 1 billion shares. We ended up having people that were holding a long -- what I would say is a long distribution tail of people holding 30 or 40 shares. And so the consolidation is largely to do what is supposed to do, consolidate the register. So I think it will have an impact on the differential in valuation between Warsaw and London. I can't explain the differential in valuations. It is a mystery to me. I don't know why that would ever exist. I would hope that over time, and I hope for a long time that we would have valuations that were in proximity or matching. But I don't think the consolidation on its own will do that. I do not like that one -- I don't think the London value is correct, but I certainly don't think the Warsaw value is correct either. So I don't think the consolidation will affect the valuations.
Hassan asks, the Board must understand that they received some brutal questions because there's a disconnect between the work they do and the shareholders who are sitting on poorly performing shares. The stock price is as terrible in the sense the only thing that concern investors.
Yes, Hassan, you're right. The only thing that concerns me. I mean I'm running the business. I do not like this shareholders. As for brutal questions, I think these are all reasonable questions that owners should ask the management of the company. This stock price is wrong. The Board knows that. But the Board also knows we have to show some operational successes. Sancrai was not successful. We can't magic those out of the air. We have to work them up, and that takes time.
And so we know that these investments are good investments. We've studied them hard, and we have to be patient and work for the success of those investments. It is the only thing that concerns investors. And it's a good portion of our remuneration, I can only comment on myself. I can't comment on anyone else investing in this company, but I have consistently invested my personal remuneration into this company. And I repeat that again and again and again. So I have sat in the same position as all investors do.
Why did the Warsaw Stock Exchange suspend trading on Serinus stocks?
They did that because they need time for the registrar to effect -- to reflect the new ISIN of the consolidation of shares. We argue very, very hard against that. We do not agree with it. We think it's wrong, but it was a Warsaw Stock Exchange demand.
I think we've answered most of these questions. How does the lifting -- Nick asks, how does the lifting schedule work in Tunisia? Why was there a substantial inventory build in oil in Q1. We produced -- so we produced to the coast, to storage facilities on the coast. When there are ships available or volumes with other producers available, we put together our cargoes, and we sell those. So the determinants are not simply our production. We're not selling it as a stream. We're selling it to a lifting to a ship into the Mediterranean.
There is some optimization of price. We'd like to sell when the price is high. And there is some contractual -- we're working with people to have contracts that stabilize that. But simply, we're not connected to a pipeline that goes to a refinery. We're connected to a pipeline that goes to storage facilities. Those storage facilities go into boats, the availability of ships in the Mediterranean and enough cargo to fill that boat with other accounts, with other producers in the country, determine when our liftings happen. Within that, there's commercial considerations when we want the lifting to happen. So we manage that to try to capture the best prices. I'm trying to find questions that we...
I think, Jeff, you've actually pretty much covered off everything that...
I think that's all. Yes. Thank you, guys.
If there are any further questions, of course, that comes through that the team will be able to review those, and we can publish responses where appropriate to do so on the Investment Meet Company platform. Jeff, we pressed for redirecting investors to provide you with their feedback, which I know is particularly important. I could just ask you for a few closing comments, please.
Yes. Very briefly, these are good, strong financial results. And I'd say financial results, we know that they were a beneficiary of good strong commodity prices. That's one of the -- one of the upsides of being the commodity business, but we also know that we've set ourselves up to be a beneficiary of this by having our costs manageable and being as efficient as possible. Operationally, things are progressing. And I know everyone's looking for production increases, but I think everyone also has to understand that we have to work towards that. We have to do our work properly. We have to do our seismic. We have to do our well locations properly. We have to order the equipment. All of these things take time. So I am tolerant of the criticism that we need production, we need operational successes, not just financial successes.
These are good strong financial results. We're proud of them. They give us a good, strong foundation to go off and do those operational investments. And that's really how we're trying to build this company. So operationally, I think we have bright things ahead of us. We have some good investments. They're not risk-free. We are looking at exploration. We are looking at doing some complicated workovers. But the prize there is significant, and we're eager to pursue it. So thank you for joining us. Thank you for all the questions. And I hope I've answered everything I could for you.
That's fantastic. Jeffrey, Andrew, Stuart thank you indeed for updating investors today. Please, I'll ask investors not to close the session as you'll be ultimately redirected to provide your feedback in order the management team better understand your views and expectations. It's really going to take a few moments to complete and is greatly valued by the company. On behalf of the management team of Serinus Energy plc, we'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.